The Disadvantages of Bartering

The problems with trading through a bartering system are called frictions by economists. The difficulty involved in trading and the lack of incentive to grow genuine and storeable wealth meant that economies were really limited to small communal and self-sufficient villages. Financial innovation has been every bit as important as technical innovation throughout history because it's really, really difficult to have one without the other. Just like in the villages, not specialising reduces the potential for prosperity for the entire global economy.